Transcat has gotten torched over the last six months - since October 2024, its stock price has dropped 35.3% to $84.55 per share. This was partly due to its softer quarterly results and might have investors contemplating their next move.

Following the pullback, is this a buying opportunity for TRNS? Find out in our full research report, it’s free.

Why Does TRNS Stock Spark Debate?

Serving the pharmaceutical, industrial manufacturing, energy, and chemical process industries, Transcat (NASDAQ:TRNS) provides measurement instruments and supplies.

Two Positive Attributes:

1. Long-Term Revenue Growth Shows Strong Momentum

A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Thankfully, Transcat’s 9.6% annualized revenue growth over the last five years was solid. Its growth beat the average industrials company and shows its offerings resonate with customers.

2. Outstanding Long-Term EPS Growth

We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.

Transcat’s EPS grew at a spectacular 17.1% compounded annual growth rate over the last five years, higher than its 9.6% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

One Reason to be Careful:

New Investments Fail to Bear Fruit as ROIC Declines

ROIC, or return on invested capital, is a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. On average, Transcat’s ROIC decreased by 3.8 percentage points annually over the last few years. If its returns keep falling, it could suggest its profitable growth opportunities are drying up. We’ll keep a close eye.

Final Judgment

Transcat’s merits more than compensate for its flaws. With the recent decline, the stock trades at 32.6× forward price-to-earnings (or $84.55 per share). Is now the time to initiate a position? See for yourself in our full research report, it’s free.

Stocks We Like Even More Than Transcat

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